Guided by voices

The internet has changed the way that most of us communicate on a daily basis, Andrew Picken takes a look at the current state of internet telephony in the Middle East.

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By  Andrew Picken Published  December 1, 2003

Introduction|~||~||~|If video killed the radio star, then the internet is having a good stab at the humble telephone. The rapid evolution of the internet has made people sit up and think about the best ways to communicate and, in addition to e-mail, internet telephony is emerging as a viable, less expensive, alternative to the traditional telephone networks.

The explosive growth of the internet over the last decade has been dependent on the global telecoms infrastructure built over the last century to support voice and fax communication. Now however, the potential of voice, in addition to data, traffic over the internet is now threatening to turn the existing telecoms infrastructure on its head. A recent IDC report estimates that the internet telephony market will be worth $15.1 billion by 2007 and, with its large migrant workforce and monopolistic telecoms environment, Middle East consumers would surely welcome the opportunity for a cheaper way to make calls.

"We believe that in five years time, 75% of all calls in the developed world will be made using internet telephony," is the bold claim from Janus Friis, co-founder of file sharing giants Kazaa. Friis' confidence stems from the fact that, riding high on the success of Kazaa, he has helped to launch Skype, a file sharing software that allows you to make free voice calls from one PC to another over the internet.

In a similar manner to Kazaa, Skype is a self-organised Peer-to-Peer (P2P) network, but in this case each user automatically helps other users to set up and route calls. This allows Skype to bypass any centralised telephony company or network, allowing them to offer the service for free.

"Since we started Skype, it has become as popular, or even more popular than Kazaa, as user numbers have grown even more quickly than Kazza's in the early days." says Niklas Zennström, co-founder of both Kazaa and Skype. Zennström claims Skype has attracted over two million downloads since its launch in September and he also revealed that the Swedish firm is currently developing a 'PC to landline' version of the Skype software, due for release in 2004. If this version of Skype comes to fruition then it may well prove to be the 'killer application' for the internet telephony market.

Skype is, however, the new kid on the IP telephony block with a number of established firms already serving the market. Net2Phone is one of the biggest players and offers discounted calls to anyone that downloads its software and buys pre-paid credit.
"The majority of our revenue today comes from calls that originate outside the US and Western Europe," explains Sarah Hofstetter, senior vice president, Corporate Communications, Net2Phone. Reflecting on the Middle East market, Hofstetter claims that the region's sizeable migrant workforce is definitely an attractive proposition: "We see sizeable opportunities coming from emerging markets where telecommunications liberalisation is on the horizon."

When it comes to actually getting started, internet telephony services are just a quick download away for Windows readers. All that is left is to plug in a headset, or IP telephone, and then get dialling. Hofstetter indicated that the majority of Net2Phone users access its services from internet cafes or public call centres rather than from a home computer.

Back in the 1920s, television was a logical step forward from radio and the evolutionary path of internet telephony will see the addition of video messaging but this currently poses a number of problems for current internet telephony operators. "We are always exploring new ways to exploit technology [but] today, bandwidth pricing is too high and availability is too low to justify the model for delivering video," says Hofstetter.
||**||Net losses|~||~||~|
Net losses
The real powerhouse of communication today, of course, is still the telephone. The Scotsman, Alexander Graham Bell got the ball rolling over a century ago and today the majority of voice traffic is still carried over the traditional telephone networks. It's important to note that only 8% of the world's population has home access to the internet, according to Nielsen/NetRatings.

The growth of internet communication is actually complementing voice traffic according to Mohammed Al Sahim, executive vice-president of marketing for the UAE's telecoms operator, Etisalat. However, a number of important differences between traditional voice and internet voice communication still exist. "The comparison between internet telephony and voice traffic cannot be made without reference to quality of service or network security," says Al Sahim.

One crucial concern with internet telephony is sound quality, with many services often leaving users with walkie-talkie type dialogue. "The cost savings for me phoning home are fantastic, but it is always hit and miss with the quality of the calls," explains Tom Hardy, a 42-year-old Englishman using the Net2Phone service in a Dubai internet café.

Although this is internet telephony's biggest weakness, many operators claim that it is often entirely out of their hands. "The quality of internet telephony services is highly reliant on the speed of the internet connection that is used to access those services," explains Hofstetter. "We can do a lot on the back-end to improve the quality of our calls once they are on our network, including utilising unique routing techniques."

With P2P based internet telephony, the sound quality is much more reliable. "The sound encoding technology is very advanced with Skype, we use a higher audio frequency spectrum, which is possible because of broadband," explains Zennström. The crucial advantage of P2P is that the power of that network grows with the number of users but for bandwidth hungry software such as Skype, broadband access is a necessity. Across the GCC, broadband penetration accounts for just 3% of all internet connections according to the research house IDC and this meagre catch will limit Skype's growth potential in the region. Net2Phone and other established internet telephony operators can work on both narrowband and broadband.

Skype, however, has one more trick up its sleeve as the company claims that its service is more secure than a conventional telephony network, addressing another concern for potential users. "Skype is the first mainstream P2P telephony company that enables calls that are secure with 'end-to-end' encryption for superior privacy," says Zennström. "Since it's voice there is no way that a user can get a virus or Trojans using Skype."

The internet's first true love, however, was data and another popular manifestation of the internet as a tool for communicating has been through chat rooms, messenger and the ubiquitous e-mail. Microsoft estimates that over 30 billion e-mails are sent every day and e-mail has changed the way that the developed world communicates. Attracting all walks of life, chat rooms have also been fully embraced by internet users but this form of communication is under threat, particularly in light of Microsoft's decision in October to close its MSN chat services. This type of internet communication is, however, definitely small fry compared to the potential of Voice Over Internet Protocol (VoIP).
||**||The VoIP umbrella|~||~||~|
The VoIP umbrella
While it gets a lot of attention, internet telephony is just one branch of the overall VoIP tree. VoIP technology allows voice, data, images and video traffic to travel over the same network at the same time, making it more cost effective than the traditional voice and fax services offered by the traditional telecoms operators. The cost saving of using one network instead of two, in addition to cheaper servicing costs is what makes VoIP so appealing for business users.

The application of VoIP in the business environment is generating a great deal of excitement amongst the Middle East networking community. "If I receive a call, a window will pop up on my computer saying who is calling," explains Stan de Boisset, network consultant, 3Com. "If it is linked to my corporate database of customers, I will know exactly who is calling and then can make comments about the call and save the information."

Response to VoIP in the Middle East has been somewhat sluggish, however, with it mainly being restricted to campus environments such as Kuwait University and Dubai Internet City, which boasts over 5,000 IP phones. Despite the slow start, the main vendors in the market (Cisco, Avaya and 3Com) are still hammering home the virtues of VoIP for the Middle East's business community. "If we look at the history, people started learning about IP telephony in early 2000, but at that time there wasn't something concrete or solid to sell IP telephony on," explains Louay Osman, chief technology officer, at Universal Solutions, a chief supplier to Avaya. "For the past two to three years people have started to go back to their infrastructures and rebuild these to accommodate the future technologies like IP telephony."

VoIP is a new technology in the Middle East and its current costs are keeping it strictly in the enterprise and corporate arenas for the time being. "It's obvious that everybody views IP telephony as the future of telephone systems, but still, most of the small to medium organisations are still kind of hesitant in deploying this, because of the high cost of the technology at the initial stages," says Hani Nofal, technical manager, 3Com.
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Stumbling blocks
The biggest stumbling block in the VoIP battle is the region's telecoms operators who, not surprisingly, are concerned about the impact on their own business from VoIP.
"Most of them [telecoms operators] show vehement opposition to it [VoIP] because they still rely heavily on international traffic for the bulk of their revenues and VoIP eats into that," says Jawad Abbassi, president of the Arab Advisors Group. At the moment, long-distance calls are directed through the Public Switched Telephone Network (PSTN), which attracts high tarrifs for calls to Europe and the USA. The telecoms operators then add their own margins on top of these tarrifs and this remains a very lucrative part of their overall business.

The majority of the region's telecoms operators are keeping their cards close to their chest on the issue of VoIP but most acknowledge the significance of this new technology. "IP telephony is an important technology development that will have far reaching implications on telecommunications networks. We are monitoring these developments and trends as well as the advancement in IP," says Etisalat's Al Sahim.

This hasn't prevented many operators dragging their feet when it comes to VOIP and in the UAE, for example, companies are only legally allowed to sell VoIP equipment if it is for use within the same location. The practice of international calls via VoIP using the company network is next to impossible in most countries around the Middle East due to the current restrictions in place.

"Because IP telephony overlaps with the area of voice over IP; there are implementation issues in most of the countries." says Ajay Singh Chauhan, network unit manager, at regional distributor Mindware. "All the countries realise they'll have to go ahead with it eventually, but they're still trying to figure out how they approach it and what can they do to control the use."

"At the moment it's going to remain. The normal service provider for telephony has already invested a lot in providing this service, and if voice traffic was to move to the internet, the service provider would certainly lose out," says Shailendra Sainani, Aptec Gulf's product manager for the 3Com IPT range. "So for the time being, unless the government decides otherwise, I don't see any new regulations coming in."

A glimmer of hope for VoIP in the Middle East has come from two unlikely quarters. Curiously, Iran is currently the only country in the region to fully licence VoIP, but this is due to more altruistic motivations. "The whole reason behind everything is employment, not revenues," says Mohsen Malaki, senior analyst, IDC CEMA's telecoms group. "They said we want more employment so it's better to have multiple private sector providers who will employ." Saudi Telecom has also been pro IP voice and communications, installing a Cisco IP contact centre and allowing voice traffic across lease lines or data circuits, though only within the Saudi Arabia border.
||**||The future of VoIP|~||~||~|
The future of VoIP
Whatever way the telecoms operator issue pans out in this region, VoIP is guaranteed to have a big future across the world. Testament to this is that VoIP is now finding its way into a number of devices across the IT spectrum. For example, Toshiba has recently unveiled its Pocket PC e800 PDA, aimed at the corporate market, which has VoIP capabilities in addition to integrated Wi-Fi (802.11b) and Bluetooth connectivity. Using Toshiba VoIP software users can place phone calls over a high-speed wireless network anywhere in the world, allowing them to reduce the cost of making long distance and international calls via traditional phone systems.

"Customers desire a personal lightweight data access device that not only keeps them connected to the corporate network, but also delivers on new technology that increases productivity and ease of use away from the office," says Ahmed Khalil, regional manager of Toshiba's Computer Systems Division.

Many feel that VoIP's growth in the Middle East will be inextricably linked to the deployment of Wi-Fi in this region. For devices such as Toshiba's e800 to be truly effective, it requires a public network of wireless internet access points, or 'hotspots' in order to gain access to the VoIP networks.

"We see the proliferation of Wi-Fi as an excellent driver for VoIP," says Hofstetter. "You will be able to take your VoIP-enabled cell phone and roam onto hotspots globally, making inexpensive VoIP calls instead of having to pay expensive roaming charges."
"Wi-Fi represents opportunities to expand access to broadband Internet without having to build out infrastructure, which allows areas to gain access to broadband services inexpensively and quickly without having to lay fibre in the ground," adds Hofstetter.
With only a handful of hotspots available in the entire region, this type of development looks to be a few years shy of becoming reality for Middle East consumers, who will need to rely on the traditional telephone networks for their VoIP needs.

Net2Phone is currently embroiled in a legal battle with US telecoms operators who are fighting back against VoIP. "In five years, we expect to either share a telecom license or own a telecom license in deregulated markets or offer VoIP services directly to consumers and businesses," says Hofstetter.

The next five years will be an interesting time for both internet telephony and VoIP in general. The region's telecoms operators will not give up their healthy revenues without a fight but if services like Skype take off in the same manner as Kazaa then they might not have much choice. If we look at the way that the music industry was shaken up by the advent of internet downloading services, such as Napster and Kazaa, then it is not too inconceivable that internet telephony will have the same effect on the telecoms industry. The internet and traditional telecoms networks have an intriguing interdependency but ultimately the internet may end up stealing its masters voice.
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